LACK OF HOUSING INVENTORY PUTS UPWARD PRESSURE ON PRICE

MarketNsight, a leading real estate data and analysis provider, reports that home prices continue to increase due to heavily constrained inventory for new and resale homes.

“We will continue to see upward pressure on prices in 2024,” said John Hunt, Principal and Chief Analyst at MarketNsight. “Inventory is still 45% below pre-COVID levels. We need an additional 46,000 units annually in Atlanta just to get back to equilibrium, which is a six-month supply.”

February 2024 home prices were up 29% over February 2021, up 53% over February 2020, and up 63% over February 2019.

There is a dearth of inventory, which is why new homes are doing so well, and prices will not collapse. Hunt comments, “It is simply the law of supply and demand. With fewer homes and stable demand, the market responds with higher prices.”

Rates for 30-year Fixed mortgages have been sticky on the way down and have averaged in the high sixes. Rates have actually risen slightly since January, reaching 6.94% in the last week of February. The result has been a pause in positive momentum for total pending sales.

Why are rates so slow to moderate? Inflation continues to be higher than expected and can largely be attributed to increases in shelter costs. We do not see this trend changing anytime soon because a lack of housing supply is continuing to put upward pressure on prices.

Home prices were up 10% year over year in February, just as they were in January, and shelter is a large part of inflation calculations. So, it’s unsurprising that February’s CPI numbers announced earlier this month came in hotter than anticipated.